Skip to main navigation menu Skip to main content Skip to site footer

Vol. 41 No. 73 (2022)

Economic theory

Communication, Strategic Moves, and Commitment: An Analysis from the Experimental Economics

https://doi.org/10.19053/01203053.v41.n73.2022.13496

Published 2022-02-22

  • Luis Alejandro Palacio Garcia
    • ,
  • Brayan Snehider Díaz Pérez

Luis Alejandro Palacio Garcia
Universidad Industrial de Santander

Brayan Snehider Díaz Pérez
Universidad EAFIT

Abstract

Thomas Schelling is one of the most important references in game theory and negotiation, as he has been recognized as a pioneer in proposing the concepts and laying the foundations of formal models, always based on observation and empirical contrast. His focus on communication, strategic moves and commitment makes it possible to understand the advantages, in terms of bargaining power, of publicly announcing that the decision has been made, even when the message is cheap talk. Taking this starting point, this article focuses on how experimental economics has expanded and refined its original proposals. It is possible to classify this literature into three aspects: 1) non-binding communication, 2) use of strategic moves, 3) credibility and commitment. Among the findings, it is highlighted that communication is a useful mechanism for transmitting private information and, therefore, affects the beliefs and behavior of negotiators. For their part, strategic moves play a role since they transfer the advantage of the first move to the second player. Finally, the sense of justice, fear of punishment, and the reputation of negotiators affect the credibility of their threats.

Keywords

Game Theory and Bargaining Theory, Matching Theory, threats, bargaining power, conflict resolution, credible commitment

XML (Español) PDF (Español)

Author Biography

Brayan Snehider Díaz Pérez

Economista UIS. Asistente de investigación en el Grupo de Investigaciones Económicas y Financieras de la Universidad EAFIT

References

  1. Aumann, R. (1990). Nash-Equilibria are not Self-Enforcing. In J. Gabszewicz, J. F. Richard, & L. Wolsey (Eds.), Economic Decision Making: Games, Econometrics and Optimization (pp. 201-206). North-Holland.
  2. Baliga, S., & Sjöström, T. (2012). The Strategy of Manipulating Conflict. American Economic Review, 102(6), 2897-2922.
  3. https://doi.org/10.1257/aer.102.6.2897 DOI: https://doi.org/10.1257/aer.102.6.2897
  4. Benard, S. (2013). Reputation Systems, Aggression, and Deterrence in Social Interaction. Social Science Research, 42(1), 230-245.
  5. https://doi.org/10.1016/j.ssresearch.2012.09.004 DOI: https://doi.org/10.1016/j.ssresearch.2012.09.004
  6. Binmore, K., Shaked, A., & Sutton, J. (1985). Testing Noncooperative Bargaining Theory: A Preliminary Study. American Economic Review, 75(5), 1178-1180.
  7. Blume, A., & Ortmann, A. (2007). The Effects of Costless Pre-Play Communication: Experimental Evidence from Games with Pareto-Ranked Equilibria. Journal of Economic Theory, 132, 274-290.
  8. https://doi.org/10.1016/j.jet.2005.03.001 DOI: https://doi.org/10.1016/j.jet.2005.03.001
  9. Bolton, G. (1998). Bargaining and Dilemma Games: From Laboratory Data Towards Theoretical Synthesis. Experimental Economics, 1(3), 257-281.
  10. https://doi.org/10.1023/A:1009911411418 DOI: https://doi.org/10.1023/A:1009911411418
  11. https://doi.org/10.1023/A:1009951108693 DOI: https://doi.org/10.1023/A:1009951108693
  12. Bornstein, G., Budescu, D., & Zamir, S. (1997). Cooperation in Intergroup, N-Person, and Two-Person Games of Chicken. Journal of Conflict Resolution, 41(3), 384-406.
  13. https://doi.org/10.1177/0022002797041003003 DOI: https://doi.org/10.1177/0022002797041003003
  14. Bosman, R., & Van Winden, F. (2002). Emotional Hazard in a Power-to-Take Experiment. The Economic Journal, 112(476), 147-169.
  15. https://doi.org/10.1111/1468-0297.0j677 DOI: https://doi.org/10.1111/1468-0297.0j677
  16. Brandts, J., & Charness, G. (2000). Hot vs. Cold: Sequential Responses and Preference Stability in Experimental Games. Experimental Economics, 2(3), 227-238.
  17. https://doi.org/10.1023/A:1009962612354 DOI: https://doi.org/10.1023/A:1009962612354
  18. Brandts, J., & Charness, G. (2003). Truth or Consequences: An Experiment. Management Science, 49(1), 116-130.
  19. https://doi.org/10.1287/mnsc.49.1.116.12755 DOI: https://doi.org/10.1287/mnsc.49.1.116.12755
  20. Cabrales, A., Charness, G., & Villeval, M. C. (2011). Hidden Information, Bargaining Power, and Efficiency: An Experiment. Experimental Economics, 14(2), 133-159.
  21. https://doi.org/10.1007/s10683-010-9260-6 DOI: https://doi.org/10.1007/s10683-010-9260-6
  22. Charness, G. (2000). Self-Serving Cheap Talk: A Test of Aumann's Conjecture. Games and Economic Behavior, 33(2), 177-194.
  23. https://doi.org/10.1006/game.1999.0776 DOI: https://doi.org/10.1006/game.1999.0776
  24. Charness, G., & Dufwenberg, M. (2006). Promises and Partnership. Econometrica, 74(6), 1579-1601.
  25. https://doi.org/10.1111/j.1468-0262.2006.00719.x DOI: https://doi.org/10.1111/j.1468-0262.2006.00719.x
  26. Charness, G., & Dufwenberg, M. (2010). Bare Promises: An Experiment. Economics Letters, 107(2), 281-283.
  27. https://doi.org/10.1016/j.econlet.2010.02.009 DOI: https://doi.org/10.1016/j.econlet.2010.02.009
  28. Conrads, J., & Irlenbusch, B. (2013). Strategic Ignorance in Ultimatum Bargaining. Journal of Economic Behavior and Organization, 92, 104-115. https://doi.org/10.1016/j.jebo.2013.05.010 DOI: https://doi.org/10.1016/j.jebo.2013.05.010
  29. Cooper, R., DeJong, D., Forsythe, R., & Ross, T. (1989). Communication in the Battle of the Sexes Game: Some Experimental Results. RAND Journal of Economics, 20(4), 568-587. https://doi.org/10.2307/2555527 DOI: https://doi.org/10.2307/2555734
  30. Cooper, R., DeJong, D., Forsythe, R., & Ross, T. (1990). Selection Criteria in Coordination Games: Some Experimental Results. American Economic Review, 80(1), 218-233.
  31. Cooper, R., DeJong, D., Forsythe, R., & Ross, T. (1992). Communication in Coordination Games. Quarterly Journal of Economics, 107(2), 739-771. https://doi.org/10.2307/2118488 DOI: https://doi.org/10.2307/2118488
  32. Cooper, R., DeJong, D., Forsythe, R., & Ross, T. (1993). Forward Induction in the Battle-of-the-Sexes Games. American Economic Review, 83(5), 1303-1316.
  33. Cooper, R., DeJong, D., Forsythe, R., & Ross, T. (1996). Cooperation without Reputation: Experimental Evidence from Prisoner's Dilemma Games. Games and Economic Behavior, 12(2), 187-218. https://doi.org/10.1006/game.1996.0013 DOI: https://doi.org/10.1006/game.1996.0013
  34. Crawford, V. (2003). Lying for Strategic Advantage: Rational and Boundedly Rational Misrepresentation of Intentions. The American Economic Review, 93(1), 133-149. https://doi.org/10.1257/000282803321455197 DOI: https://doi.org/10.1257/000282803321455197
  35. Crawford, V., Gneezy, U., & Rottenstreich, Y. (2008). The Power of Focal Points is Limited: Even Minute Payoff Asymmetry May Yield Large Coordination Failures. American Economic Review, 98(4), 1443-1458. https://doi.org/10.1257/aer.98.4.1443 DOI: https://doi.org/10.1257/aer.98.4.1443
  36. Crawford, V., & Sobel, J. (1982). Strategic Information Transmission. Econometrica, 50(6), 1431-1451. https://doi.org/10.2307/1913390 DOI: https://doi.org/10.2307/1913390
  37. Croson, R., Boles, T., & Murnighan, K. (2003). Cheap Talk in Bargaining Experiments: Lying and Threats in Ultimatum Games. Journal of Economic Behavior & Organization, 51(2), 143-159. https://doi.org/10.1016/S0167-2681(02)00092-6 DOI: https://doi.org/10.1016/S0167-2681(02)00092-6
  38. Dixit, A. (2006). Thomas Schelling's Contributions to Game Theory. The Scandinavian Journal of Economics, 108(2), 213-229.
  39. https://doi.org/10.1111/j.1467-9442.2006.00447.x DOI: https://doi.org/10.1111/j.1467-9442.2006.00447.x
  40. Dixit, A., & Nalebuff, B. (2010). El arte de la estrategia. Anthony Bosh Editor.
  41. Duffy, J., & Feltovich, N. (2002). Do Actions Speak Louder than Words? An Experimental Comparison of Observation and Cheap Talk. Games and Economic Behavior, 39(1), 1-27.
  42. https://doi.org/10.1006/game.2001.0892 DOI: https://doi.org/10.1006/game.2001.0892
  43. Ellingsen, T., & Johannesson, M. (2004). Promises, Threats and Fairness. The Economic Journal, 114(495), 397-420.
  44. https://doi.org/10.1111/j.1468-0297.2004.00214.x DOI: https://doi.org/10.1111/j.1468-0297.2004.00214.x
  45. Ellingsen, T., & Johannesson, M. (2008). Anticipated Verbal Feedback Induces Altruistic Behavior. Evolution and Human Behavior, 29(2), 100-105. https://doi.org/10.1016/j.evolhumbehav.2007.11.001 DOI: https://doi.org/10.1016/j.evolhumbehav.2007.11.001
  46. Elster, J. (1996). Rationality and the Emotions. The Economic Journal, 106(438), 1386-1397. https://doi.org/10.2307/2235530 DOI: https://doi.org/10.2307/2235530
  47. Elster, J. (1998). Emotions and Economic Theory. Journal of Economic Literature, 36(1), 47-74.
  48. Embrey, M., Fréchette, G., & Lehrer, S. (2015). Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioural Types. Review of Economic Studies, 82(2), 608-631. https://doi.org/10.1093/restud/rdu029 DOI: https://doi.org/10.1093/restud/rdu029
  49. Farrell, J., & Gibbons, R. (1989). Cheap Talk Can Matter in Bargaining. Journal of Economic Theory, 48(1), 221-237.
  50. https://doi.org/10.1016/0022-0531(89)90125-7 DOI: https://doi.org/10.1016/0022-0531(89)90125-7
  51. Farrell, J., & Rabin, M. (1996). Cheap Talk. Journal of Economic Perspectives, 10(3), 103-118. https://doi.org/10.1257/jep.10.3.103 DOI: https://doi.org/10.1257/jep.10.3.103
  52. Fehr, E., & Gächter, S. (2000). Cooperation and Punishment in Public Goods Experiments. American Economic Review, 90(4), 980-994. https://doi.org/10.1257/aer.90.4.980 DOI: https://doi.org/10.1257/aer.90.4.980
  53. Fellner, G., & Güth, W. (2003). What Limits Escalation? Varying Threat Power in an Ultimatum Experiment. Economics Letters, 80(1), 53-60. https://doi.org/10.1016/S0165-1765(03)00063-6 DOI: https://doi.org/10.1016/S0165-1765(03)00063-6
  54. Fischer, S., Güth, W., Müller, W., & Stiehler, A. (2006). From Ultimatum to Nash Bargaining: Theory and Experimental Evidence. Experimental Economics, 9(1), 17-33. https://doi.org/10.1007/s10683-006-1468-0 DOI: https://doi.org/10.1007/s10683-006-1468-0
  55. Forsythe, R., Kennan, J., & Sopher, B. (1991). An Experimental Analysis of Strikes in Bargaining Games with One-Sided Private Information. American Economic Review, 81(1), 253-278.
  56. Forsythe, R., Lundholm, R., & Rietz, T. (1999). Cheap Talk, Fraud, and Adverse Selection in Financial Markets: Some Experimental Evidence. The Review of Financial Studies, 12(3), 481-518. https://doi.org/10.1093/revfin/12.3.0481 DOI: https://doi.org/10.1093/revfin/12.3.0481
  57. Frank, R. (1988). Passions Within Reason: The Strategic Role of Emotions (p. 304). W. W. Norton & Company Inc.
  58. Frank, R. (1993). The Strategic Role of the Emotions: Reconciling Over-And Undersocialized Accounts of Behavior. Rationality and Society, 5(2), 160-184. https://doi.org/10.1177/1043463193005002003 DOI: https://doi.org/10.1177/1043463193005002003
  59. Gintis, H., Smith, E., & Bowles, S. (2001). Costly Signaling and Cooperation. Journal of Theoretical Biology, 213(1), 103-119.
  60. https://doi.org/10.1006/jtbi.2001.2406 DOI: https://doi.org/10.1006/jtbi.2001.2406
  61. Glick, S., & Croson, R. (2001). Reputations in Negotiation. In S. J. Hoch, H. C. Kunreuther, & R. E. Gunther (Eds.), Wharton on Making Decisions (pp. 177-186). John Wiley & Sons, Inc.
  62. Güth, W., Huck, S., & Rapoport, A. (1998). The Limitations of the Positional Order Effect: Can it Support Silent Threats and Non-Equilibrium Behavior? Journal of Economic Behavior & Organization, 34(2), 313-325. https://doi.org/10.1016/S0167-2681(97)00057-7 DOI: https://doi.org/10.1016/S0167-2681(97)00057-7
  63. Güth, W., Müller, W., & Spiegel, Y. (2006). Noisy Leadership: An Experimental Approach. Games and Economic Behavior, 57(1), 37-62. https://doi.org/10.1016/j.geb.2006.05.004 DOI: https://doi.org/10.1016/j.geb.2006.05.004
  64. Halevy, N., Weisel, O., & Bornstein, G. (2011). ''In-Group Love'' and ''Out-Group Hate'' in Repeated Interaction Between Groups. Journal of Behavioral Decision Making, 25(2), 188-195. https://doi.org/10.1002/bdm.726 DOI: https://doi.org/10.1002/bdm.726
  65. Hirshleifer, J. (1987). On the Emotions as Guarantors of Threats and Promises. In J. Dupré (Ed.), The Latest on the Best: Essays on Evolution and Optimality (pp. 307-326). MIT Press.
  66. Hirshleifer, J. (2000). Game-Theoretic Interpretations of Commitment. UCLA Department of Economics in its series UCLA Economics Working Papers 799.
  67. Hörtnagl, T., Kerschbamer, R., & Stracke, R. (2019). Competing for Market Shares: Does the Order of Moves Matter Even When It Shouldn't? Journal of Economic Behavior & Organization, 166, 346-365. https://doi.org/10.1016/j.jebo.2019.07.005 DOI: https://doi.org/10.1016/j.jebo.2019.07.005
  68. Huck, S., & Müller, W. (2005). Burning Money and (Pseudo) First-Mover Advantages: An Experimental Study on Forward Induction. Games and Economic Behavior, 51(1), 109-127. https://doi.org/10.1016/j.geb.2004.03.006 DOI: https://doi.org/10.1016/j.geb.2004.03.006
  69. Klein, D., & O'Flaherty, B. (1993). A Game-Theoretic Rendering of Promises and Threats. Journal of Economic Behavior & Organization, 21(3), 295-314.
  70. https://doi.org/10.1016/0167-2681(93)90054-S DOI: https://doi.org/10.1016/0167-2681(93)90054-S
  71. Mago, S., Sheremeta, R., & Yates, A. (2013). Best-of-Three Contest Experiments: Strategic Versus Psychological Momentum. International Journal of Industrial Organization, 31(3), 287-296.
  72. https://doi.org/10.1016/j.ijindorg.2012.11.006 DOI: https://doi.org/10.1016/j.ijindorg.2012.11.006
  73. Myerson, R. (2009). Learning from Schelling's Strategy of Conflict. Journal of Economic Literature, 47(4), 1109-1125.
  74. https://doi.org/10.1257/jel.47.4.1109 DOI: https://doi.org/10.1257/jel.47.4.1109
  75. Neugebauer, T., Poulsen, A., & Schram, A. (2008). Fairness and Reciprocity in the Hawk-Dove Game. Journal of Economic Behavior & Organization, 66(2), 243-250. https://doi.org/10.1016/j.jebo.2005.12.008 DOI: https://doi.org/10.1016/j.jebo.2005.12.008
  76. Nikiforakis, N. (2008). Punishment and Counter-Punishment in Public Good Games: Can we Really Govern Ourselves? Journal of Public Economics, 92(1-2), 91-112. https://doi.org/10.1016/j.jpubeco.2007.04.008 DOI: https://doi.org/10.1016/j.jpubeco.2007.04.008
  77. Nikiforakis, N., & Engelmann, D. (2011). Altruistic Punishment and the Threat of Feuds. Journal of Economic Behavior & Organization, 78(3), 319-332. https://doi.org/10.1016/j.jebo.2011.01.017 DOI: https://doi.org/10.1016/j.jebo.2011.01.017
  78. Ockenfels, A., & Selten, R. (2000). An Experiment on the Hypothesis of Involuntary Truth-Signalling in Bargaining. Games and Economic Behavior, 33(1), 90-116. https://doi.org/10.1006/game.1999.0762 DOI: https://doi.org/10.1006/game.1999.0762
  79. Orbell, J., & Dawes, R. (1993). Social Welfare, Cooperators' Advantage, and the Option of Not Playing the Game. American Sociological Review, 58(6), 787-800. https://doi.org/10.2307/2095951 DOI: https://doi.org/10.2307/2095951
  80. Palacio, L., Cortés, A., & Muñoz-Herrera, M. (2015a). The Bargaining Power of Commitment: An Experiment of the Effects of Threats in the Sequential Hawk-Dove Game. Rationality and Society, 27(3), 283-308. https://doi.org/10.1177/1043463115592848 DOI: https://doi.org/10.1177/1043463115592848
  81. Palacio, L., Cortés, A., & Muñoz-Herrera, M. (2015b). The Strategic Role of Nonbinding Communication. Applied Mathematics, 11.
  82. https://doi.org/10.1155/2015/910614 DOI: https://doi.org/10.1155/2015/910614
  83. Poulsen, A., & Roos, M. (2010). Do People Make Strategic Commitments? Experimental Evidence on Strategic Information Avoidance. Experimental Economics, 13(2), 206-225. https://doi.org/10.1007/s10683-010-9236-6 DOI: https://doi.org/10.1007/s10683-010-9236-6
  84. Poulsen, A., & Tan, J. (2007). Information Acquisition in the Ultimatum Game: An Experimental Study. Experimental Economics, 10(4), 391-409. https://doi.org/10.1007/s10683-006-9143-z DOI: https://doi.org/10.1007/s10683-006-9143-z
  85. Rabin, M. (1990). Communication Between Rational Agents. Journal of Economic Theory, 51(1), 144-170. https://doi.org/10.1016/0022-0531(90)90055-O DOI: https://doi.org/10.1016/0022-0531(90)90055-O
  86. Roth, A. E., Murnighan, J. K., & Schoumaker, F. (1988). The Deadline Effect in Bargaining: Some Experimental Evidence. The American Economic Review, 78(4), 806-823.
  87. Roth, A., Malouf, M., & Murnighan, J. (1981). Sociological Versus Strategic Variables in Bargaining. Journal of Economic Behavior & Organization, 2(2), 153-178. https://doi.org/10.1016/0167-2681(81)90003-2 DOI: https://doi.org/10.1016/0167-2681(81)90003-2
  88. Rubinstein, A. (1982). Perfect Equilibrium in a Bargaining Model. Econometrica, 50(1), 97-109. https://doi.org/10.2307/1912531 DOI: https://doi.org/10.2307/1912531
  89. Salazar, B. (2007). Thomas Schelling: la paradoja de un economista errante. Revista de Economía Institucional, 9, 131-152.
  90. Schelling, T. (1956). An Essay on Bargaining. American Economic Review, 46(3), 281-306.
  91. Schelling, T. (1960). The Strategy of Conflict (p. 309). Harvard University Press.
  92. Selten, R. (1975). Reexamination of the Perfectness Concept for Equilibrium Points in Extensive Games. International Journal of Game Theory, 4(1), 25-55. https://doi.org/10.1007/BF01766400 DOI: https://doi.org/10.1007/BF01766400
  93. Sheremeta, R. (2010). Experimental Comparison of Multi-Stage and One-Stage Contests. Games and Economic Behavior, 68(2), 731-747. https://doi.org/10.1016/j.geb.2009.08.001 DOI: https://doi.org/10.1016/j.geb.2009.08.001
  94. Steinel, W., & Dreu, C. (2004). Social Motives and Strategic Misrepresentation in Social Decision Making. Journal of Personality and Social Psychology, 86(3), 419-434. https://doi.org/10.1037/0022-3514.86.3.419 DOI: https://doi.org/10.1037/0022-3514.86.3.419
  95. Valley, K., Moag, J., & Bazerman, M. (1998). 'A Matter of Trust': Effects of Communication on the Efficiency and Distribution of Outcomes. Journal of Economic Behavior & Organization, 34(2), 211-238. https://doi.org/10.1016/S0167-2681(97)00054-1 DOI: https://doi.org/10.1016/S0167-2681(97)00054-1
  96. Wilson, R., & Sell, J. (1997). "Liar, Liar...": Cheap Talk and Reputation in Repeated Public Good Settings. Journal of Conflict Resolution, 41(5), 695-717. https://doi.org/10.1177/0022002797041005005 DOI: https://doi.org/10.1177/0022002797041005005

Downloads

Download data is not yet available.

Similar Articles

<< < 12 13 14 15 16 17 18 19 20 21 > >> 

You may also start an advanced similarity search for this article.